Oct 11/Massive 10 tonne increase in gold inventory at the GLD despite gold’s fall??/1.76 million oz removed from SLV/ We now have over 25 tonnes of gold standing in October/Over 25 tonnes repatriated to Germany from the FRBNY/More troubles for Deutsche bank/Turkey and Russia sign the Turkish south stream project underneath the Black sea/Russia demands all foreign students to return to Russia/The pound collapses today/ Also the USALabour LCMI, the favourite of the Fed (Janet) collapses!!!

Gold $1254.00 up  $1.50

Silver 17.47 up 5  cents

In the access market 5:15 pm


Gold: 1256.00

Silver: 17.66




The Shanghai fix is at 10:15 pm est and 2:15 am est

The fix for London is at 5:30  am est (first fix) and 10 am est (second fix)

Thus Shanghai’s second fix corresponds to 195 minutes before London’s first fix.

And now the fix recordings:

Shanghai morning fix OCT 11 (10:15 pm est last night): $  1262.18


Shanghai afternoon fix:  2: 15 am est (second fix/early  morning):$   1263.11




London Fix: OCT 11: 5:30 am est:  $1256.40   (NY: same time:  $1256.40:    5:30AM)

London Second fix OCT 11: 10 am est:  $1253.45  (NY same time: $1254.10 ,    10 AM)

It seems that Shanghai pricing is higher than the other  two , (NY and London). The spread has been occurring on a regular basis and thus I expect to see arbitrage happening as investors buy the lower priced NY gold and sell to China at the higher price. This should drain the comex.

Also why would mining companies hand in their gold to the comex and receive constantly lower prices.  They would be open to lawsuits if they knowingly continue to supply the comex despite the fact that they could be receiving higher prices in Shanghai.


For comex gold: 


For silver:

for the Oct contract month:  0 notices for NIL oz.


Let us have a look at the data for today



In silver, the total open interest FELL by 685 contracts DOWN to 188,783. The open interest FELL as the silver price was UP 11 cents in Friday’s trading .In ounces, the OI is still represented by just less THAN 1 BILLION oz i.e. .943 BILLION TO BE EXACT or 134% of annual global silver production (ex Russia &ex China).

In silver for October we had 0 notices served upon for nil oz

In gold, the total comex gold rose by 2122 contracts with the tiny fall in price of gold( $0.50 on Friday) . The total gold OI stands at 505,845 contracts. The bankers have done a great job fleecing longs


With respect to our two criminal funds, the GLD and the SLV:




Total gold inventory rests tonight at: 958.90 tonnes of gold


we had A HUGE WITHDRAWAL at the SLV to the tune of 1.762 million oz

THE SLV Inventory rests at: 361.147 million oz


First, here is an outline of what will be discussed tonight:

1. Today, we had the open interest in silver FELL by 2122 contracts DOWN to 188,783 as the price of silver rose by 11 cents with Friday’s trading.The gold open interest ROSE by 2122 contracts UP to 505,845 as the price of gold fell $0.50 IN FRIDAY’S TRADING.

(report Harvey).

2.a) The Shanghai and London gold fix report



2 b) Gold/silver trading overnight Europe, Goldcore

(Mark O’Byrne/zerohedge

and in NY:  Bloomberg


2c) Federal Reserve Bank of New York/earmarked gold removal



i)Late  MONDAY night/TUESDAY morning: Shanghai closed UP 17.10 POINTS OR .56%/ /Hang Sang closed DOWN 302.30 POINTS OR 1.27%. The Nikkei closed UP  164.67 POINTS OR 0.98% Australia’s all ordinaires  CLOSED UP 0.08% /Chinese yuan (ONSHORE) closed DOWN at 6.67197/Oil FELL to 50L84 dollars per barrel for WTI and 52.70 for Brent. Stocks in Europe: ALL IN THE GREEN   Offshore yuan trades  6.67282 yuan to the dollar vs 6.67197 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE WIDENS QUITE A BIT  AS MORE USA DOLLARS   LEAVE CHINA’S SHORES





none today


i)China has a huge housing bubble as home prices rise exponentially in tier 1 cities. Over 71% of all new Chinese loans go to fund mortgages on homes. Chinese debt to GDP is over 300%  (approx. 31 trillion USA) and a huge proportion of debt is non performing and debt holders cannot even pay interest on their debt.

(courtesy zero hedge)

ii)Over the course of the past year, we have highlighted to you the huge problems facing China with respect to their huge debt.   China has a corporate debt of 20 trillion USA and a total debt of 31 trillion against a GDP of only 10 trillion.  Thus it’s debt to GDP is a staggering 300% and as much as 25% of their loans are non performing.  We now get a study which suggests that China will need to recapitalize their banks by 1.7 trillion USA and that would be impossible as USA funds are fleeing the country:

( zero hedge)


i)A bail in is likely now as DB’s CEO returns home empty handed after failing to reach a deal with the dept of Justice.

( zero hedge)

ii)Even in the world of negative interest rates, Deutsche bank fund costs are considerably higher than its peer: -17 basis points vs -28 basis points !! IN this negative interest rate world that can only signify its creditworthiness is basically ZERO!!!!!~

( zero hedge)


Great reason for gold to fall!

the pound crashes today!!:

(courtesy zero hedge)




Turkey and Russian finally sign the very strategic Turkish steam gas pipeline which will run under the Black Sea.  This is a death blow to the Qatar-Saudi Arabia- pipeline proposal.  The uSA are not happy campers with this.

Also Egypt needs 12 billion dollars in aid and are approaching Moscow.  Will Egypt switch alliance and go over to Russian influence as Russia will propose air bases on Egyptian soil:

( zero hedge)


Brilliant!! Putin cancels trip to France after Hollande accuses the Russians of war crimes:

( zero hedge)




I do not know about you, but I think the following is quite alarming;  The Russian government has told Russian students studying abroad to immediately return to Russia:

That news should cause gold to fall a little more. Not alarming enough

( zero hedge)


The following is important:  Bridgewater’s Ray Dalio calculates that a rise in yield of just one per cent would cause a loss of 2.4 trillion dollars to global bond investors
( Ray Dalio/Brigewater/zero hedge)


There does not seem to be a production cut in oil

( zero hedge)


none today


i)Interesting:  we have crash crashes galore and central banks investigates all except a crash in gold.  I wonder why
( Chris Powell/GATA)
ii)Last week’s dry by shooting of gold was caused by a huge paper avalanche orchestrated by central banks and the BIS.  Their gold reserves are never audited because they have been compromised by leasing and hypothecation:
( Egon Von Greyerz/Kingworldnews)
iii)UBS’s Axel Eeber warns of the danger of massive central bank intervention.He is correct.

( Axel Weber/UBS)

iv)India’s gold demand gets rolling again:

( Dave Kranzler/Ird)


i)The following confirms and proves that Hillary new that Saudi Arabia and Qatar fund ISIS:

( zero hedge)

ii)It sure looks like Eliz. Warren will go ballistic as it seems that the fake account creation goes back to 2005 and not 20111 as Wells Fargo head Stumpf testified to Congress.

( zero hedge)

iii)This is a biggy!!  Janet’s all import LMCI labor index is crashing.  How on earth can she raise rates when her favourite labour index is falling out of bed

( zero hedge)

Let us head over to the comex:

The total gold comex open interest ROSE BY 2,122 CONTRACTS to an OI level of 505,845 the as price of gold fell by  $0.50 with FRIDAY’S trading.

We are in the delivery month is October and here the OI LOST 3 contracts DOWN to 298. We had 3 notices filed on Friday so we NEITHER GAINED NOR LOST ANY GOLD OUNCES STANDING.

The next delivery month is November and here the OI ROSE by 47 contracts up to 3025 contracts. The next contract month and the biggest of the year is December and here this month showed an decrease of 56 contracts down to 385,974.


Today we had  3 notices filed for 300 oz of gold.

And now for the wild silver comex results.  Total silver OI FELL BY 685 contracts from 189,468 DOWN TO 188,783 as the  price of silver rose  to the tune of 11 cents yesterday.  We are moving  further from the all time record high for silver open interest set on Wednesday August 3:  (224,540).  The next non active delivery month is October and here the OI rose by 1 contracts up to 112. We had 4 notices filed on FRIDAY so we gained 5 contracts or 25,000 additional oz will  stand for delivery.The November contract month saw its OI FELL by 9 contracts DOWN to 344.   The next major delivery month is December and here it FELL BY 1717 contracts DOWN to 155,211



today we had 0 notices filed for silver: 45,000 oz

INITIAL standings for OCTOBER
 Oct 11.
Withdrawals from Dealers Inventory in oz  NIL
Withdrawals from Customer Inventory in oz  nil
 85,197.500 Scotia
2650 kilobars
Deposits to the Dealer Inventory in oz 1599.97 oz


Deposits to the Customer Inventory, in oz 
 xxx oz
No of oz served (contracts) today
3 notices 
300 oz
No of oz to be served (notices)
295 contracts
Total monthly oz gold served (contracts) so far this month
7789 contracts
778,900 oz
24.22 tonnes
Total accumulative withdrawals  of gold from the Dealers inventory this month    oz
Total accumulative withdrawal of gold from the Customer inventory this month    85,197.500 oz
Today we had 1 kilobar transaction and again the comex resumes it huge withdrawal of gold!!
Today we had one deposit into the dealer:
i) Into Brinks:  1599.97 oz
total dealer deposits:  1599.97 oz
We had zero dealer withdrawals:
total dealer withdrawals:  nil oz
We had 0 customer deposits;
total customer deposits; nil oz
We had one major customer withdrawal:
Out of Scotia:  85,197.500 oz  (2,650 oz)
total customer withdrawal:  85,197.500 oz
Total dealer inventor 2,463.441.449 or 76.623 tonnes
Total gold inventory (dealer and customer) =10,662,011.249 or 331.633 tonnes 
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 331.633 tonnes for a  gain of 29  tonnes over that period. However since August 8 we have lost 22 tonnes leaving the comex. 
For October:

Today, 0 notices were issued from JPMorgan dealer account and 0 notices were issued form their client or customer account. The total of all issuance by all participants equates to 3 contract  of which 0 notices were stopped (received) by jPMorgan dealer and  0 notice(s) was (were) stopped received) by jPMorgan customer account.

To calculate the initial total number of gold ounces standing for the Oct contract month, we take the total number of notices filed so far for the month (7789) x 100 oz or 778,900 oz, to which we add the difference between the open interest for the front month of OCT 298 contracts) minus the number of notices served upon today (3) x 100 oz per contract equals 808,400 oz, the number of ounces standing in this  NON active month of September.
Thus the INITIAL standings for gold for the SEPT contract month:
No of notices served so far (7789) x 100 oz  or ounces + {OI for the front month (301) minus the number of  notices served upon today (3) x 100 oz which equals 808,400 oz standing in this non active delivery month of Oct  (25.144 tonnes).
The gold comex is an absolute fraud.  The use of kilobars and exact weights makes the data totally absurd and fraudulent! To me, the only thing that makes sense is the fact that “kilobars: are entries of hypothecated gold sent to other jurisdictions so that they will not be short with their underwritten derivatives in that jurisdiction.  This would be similar to the rehypothecated gold used by Jon Corzine.ALSO TODAY THE LIQUIDATION OF 96 CONTRACTS HAVING STOOD FOR THE ENTIRE MONTH AND THEN ROLLING MAKES ABSOLUTELY NO SENSE
And now for silver
OCT INITIAL standings
 Oct 11. 2016
Withdrawals from Dealers Inventory NIL
Withdrawals from Customer Inventory
663,498.29 oz
Deposits to the Dealer Inventory
nil OZ
Deposits to the Customer Inventory 
nil  oz
No of oz served today (contracts)
(20,000 OZ)
No of oz to be served (notices)
112 contracts
(560,000 oz)
Total monthly oz silver served (contracts) 353 contracts (1,765,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month  NIL oz
Total accumulative withdrawal  of silver from the Customer inventory this month  1,083,508.0 oz
today, we had 0 deposit into the dealer account:
total dealer deposit: nil oz
we had 0 dealer withdrawals:
 total dealer withdrawals: nil oz
we had 2 customer withdrawals:
i) Out of Brinks;; 602,756.22 oz
ii) Out of Scotia:  60,742.07 oz
Total customer withdrawals: 663,498.29  oz
We had 0 customer deposit:
total customer deposits: nil oz
 we had 0 adjustments 
The total number of notices filed today for the Oct contract month is represented by 0 contracts for NIL oz. To calculate the number of silver ounces that will stand for delivery in OCT., we take the total number of notices filed for the month so far at  353 x 5,000 oz  = 1,765,000 oz to which we add the difference between the open interest for the front month of OCT (112) and the number of notices served upon today (0) x 5000 oz equals the number of ounces standing 
Thus the initial standings for silver for the OCT contract month:  353(notices served so far)x 5000 oz +(112 OI for front month of SEPT ) -number of notices served upon today (0)x 5000 oz  equals  2,325,000 oz  of silver standing for the OCT contract month. THIS IS STILL A HUGE SHOWING FOR SILVER AS OCTOBER IS GENERALLY A VERY WEAK DELIVERY MONTH. We gained 25,000 additional silver ounces THAT WILL  STAND.
Total dealer silver:  29.286 million (close to record low inventory  
Total number of dealer and customer silver:   173.066 million oz
The total open interest on silver is NOW close to its all time high with the record of 224,540 being set AUGUST 3.2016.  The registered silver (dealer silver) is NOW NEAR  multi year lows as silver is being drawn out at both dealer and customer levels and heading to China and other destinations. The shear movement of silver into and out of the vaults signify that something is going on in silver.
And now the Gold inventory at the GLD
Oct 11/ what!!! we had a gigantic 9.76 tonnes of inventory increase today/inventory rests at 958.90 tonnes.  (this was done with gold down?)
Oct 7:  949.14 tonnes
SEPT 30/no changes at the GLD/Inventory rests at 949.14 tonnes
SEPT 29/no changes at the GLD/Inventory rests at 949.14 tonnes
SEPT 27/A huge withdrawal of 2.08 tonnes from the GLD/Inventory rests at 949.14 tonnes/
SEPT 26./no changes in gold inventory at the GLD/Inventory rests at 951.22 tonnes
Sept 22/a huge deposit of 6.53 tonnes of gold into the GLD/Inventory rests at 950.92 tonnes/this would be a paper deposit entry/
Sept 16./no change in gold inventory at the GLD/Inventory rests at 932.22 tonnes
SEPT 15/another paper withdrawal of 3.27 tonnes of “gold” inentory leaves the GLD/Inventory rests at 932.22 tonnes
SEPT 14./A  withdrawal of 4.45 tonnes of gold inventory from the GLD/Inventory rests at 935.49 tonnes
SEPT 13/no changes in gold inventory at the GLD/Inventory rests at 939.94 tonnes
Sept 12/no changes in gold inventory at the GLD/inventory rests at 939.94 tonnes
Oct 11/ Inventory rests tonight at 958.90 tonnes


Now the SLV Inventory
Oct 11/ a withdrawal of 1.762 million oz of inventory from the SLV/Inventory rests at 361.147 million oz/
SEPT 30/no change at the SLV/inventory rests at 362.909 million oz/
SEPT 29/we had no changes at the SLV/Inventory rests at 362.909 million oz/
SEPT 27./no change in silver inventory at the SLV/Inventory rests at 364.523 million oz/
SEPT 26./no changes in silver inventory at the SLV./Inventory rests at 364.523 million oz/
Sept 22/no change in inventory at the SLV/Inventory rests at 363.479  million oz/
Sept 16/no changes in silver inventory/inventory rests at 362.434 million oz/
SEPT 15/no change in silver inventory/inventory rests at 362.434 million oz.
SEPT 14/no change in silver inventory at the SLV/Inventory rests at 362.434 million oz
sept 13/2016: a huge deposit of 1.329 million oz into the SLV/Inventory rests at 362.434 million oz/
Sept 12/a huge withdrawal of 1.614 million oz from the SLV/Inventory rests at 361.105 million oz
Oct 11.2016: Inventory 361.147 million oz

NPV for Sprott and Central Fund of Canada

will not provide today.

1. Central Fund of Canada: traded at Negative 5.4 percent to NAV usa funds and Negative 5.3% to NAV for Cdn funds!!!! 
Percentage of fund in gold 59.5%
Percentage of fund in silver:39.4%
cash .+1.1%( Oct 11/2016).
2. Sprott silver fund (PSLV): Premium RISES to +1.19%!!!! NAV (OCT 11/2016) 
3. Sprott gold fund (PHYS): premium to NAV  falls TO  1.05% to NAV  ( OCT 11/2016)
Note: Sprott silver trust back  into POSITIVE territory at 1.19% /Sprott physical gold trust is back into positive territory at 1.05%/Central fund of Canada’s is still in jail.




Last month we had a reading of 7883 million dollars worth of gold at the FRBNY at $42.22 dollars per oz. This month we had a reading of 7849 million dollars

Thus we had 34 million dollars worth of gold valued at $42.22 shipped out.


In oz:

34,000,000 divided by $42.22 =   805,305 oz

in tonnage:25.048 tonnes

Since Germany is the only official nation seeking its gold, no doubt that this gold was repatriated towards Frankfurt.






And now your overnight trading in gold,TUESDAY MORNING and also physical stories that may interest you:

Trading in gold and silver overnight in Asia and Europe

Ron Paul Says Gold Going Up” Whether Trump Or Clinton Elected

Gold prices “are going up” whether Trump or Clinton are elected according to most analysts in the gold market including former Libertarian and Republican presidential candidate Ron Paul.


Even Goldman Sachs, the primary significant bearish voice regarding gold prices is now bullish on gold in the medium and long term.

Ron Paul, an astute observer of the markets, warned in a CNBC interview that “if investors are looking for the next U.S. president to create stability in the markets, it’s not going to happen.”

Along with jitters about the Federal Reserve’s next move on interest rates, investors are weighing whether Democratic contender Hillary Clinton or Republican nominee Donald Trump will be better for investors. The libertarian icon and former Texas Congressman suggested market players may not want to hold their breath.

“Politically speaking, there is going to be a lot more uncertainty and that may go into the markets … If people are depending on political stability to get the market going I don’t think it’s going to work out.”

“I think [the election] is up for grabs. It will depend on how many people stay at home,” he explained. “People are so disgusted with the two candidates that it’s pretty hard to predict” which will prevail, he said.

For Paul, it doesn’t matter what the outcome is in November, as he doesn’t see much of a difference between the two parties.

“Nothing ever really changes regardless of which party wins. Governments keep growing, the deficits keep growing and the Fed keeps borrowing and printing more money,” he said. “I don’t expect a lot to change.”

But there is one area of the market that the former Libertarian and Republican presidential candidate sees flourishing in the long-term – Gold:

“If the economy is truly getting better, that would be better for gold long-term,” said Paul. “Short-term gold has taken a big hit and it could very well go down more, but it’s still up 10 percent from a year ago.”

Paul noted that gold has returned 300 percent since the year 2000 while the Nasdaq has rallied just 6 percent.

“The laws of economics are more powerful than all the politicians and all the bankers. It’s just that it’s erratic and very up and down and takes a while to sort out,”Paul added.

“Believe me, gold prices are going up …”

Watch Ron Paul CNBC interview here 

Gold and Silver Bullion – News and Commentary

Gold slips on dollar strength after two sessions of gains (Reuters)

Dollar Strengthens for Second Day as Treasury Yields Rise on Oil (Bloomberg)

Gold recovers after biggest weekly drop this year (Reuters)

Commodities round-up: Vladimir Putin’s comments trigger oil futures spike (IBTimes)

Vlad’s birthday present: Putin gets special £3,000 iPhone 7 made in his honour (DailyStar)

China must wean itself off debt addiction if is to avoid financial calamity, warns IMF (Telegraph)

There will be a hard Brexit (DavidMCWilliams)

There are people mining gold illegally in California’s hills (BBC)

UBS’ Weber Warns on Danger of ‘Massive Interventions’ by Central Banks (CNBC)

Gold ETPs continue to see gains in September (WorldGoldCouncil)


Gold Prices (LBMA AM)

11 Oct: USD 1,256.40, GBP 1,021.58 & EUR 1,130.76 per ounce
10 Oct: USD 1,262.10, GBP 1,016.62 & EUR 1,129.71 per ounce
07 Oct: USD 1,255.00, GBP 1,012.91 & EUR 1,127.62 per ounce
06 Oct: USD 1,265.50, GBP 994.30 & EUR 1,131.23 per ounce
05 Oct: USD 1,274.00, GBP 1,001.11 & EUR 1,134.37 per ounce
04 Oct: USD 1,309.15, GBP 1,026.90 & EUR 1,172.21 per ounce
03 Oct: USD 1,318.65, GBP 1,023.40 & EUR 1,173.99 per ounce

Silver Prices (LBMA)

11 Oct: USD 17.48, GBP 14.26 & EUR 15.78 per ounce
10 Oct: USD 17.78, GBP 14.31 & EUR 15.92 per ounce
07 Oct: USD 17.33, GBP 14.01 & EUR 15.55 per ounce
06 Oct: USD 17.76, GBP 13.98 & EUR 15.88 per ounce
05 Oct: USD 17.80, GBP 13.99 & EUR 15.86 per ounce
04 Oct: USD 18.74, GBP 14.68 & EUR 16.78 per ounce
03 Oct: USD 19.18, GBP 14.89 & EUR 17.07 per ounce

Recent Market Updates

– Gold Trading COT Report “Means Lower – Then Much Higher – Prices Coming”
– Currency Shock Sees Sterling Gold Surges 5% In One Minute “Flash Crash”
– Top Gold Forecaster: “As Quickly As Gold Fell” May “Rally Back” on Global Risks
– Gold Buying ‘Opportunity’ After Surprise 3.4% Drop
– Deutsche Bank “Is Probably Insolvent”
– GBP Gold Rises 1.3% as Sterling Slumps On ‘Hard Brexit’ Concerns, Up 36% YTD
– Why Krugman, Roubini, Rogoff And Buffett Hate Gold
– ECB Refused “To Answer Questions” – Deutsche Bank “Systemic Threat” Is “Not ECB Fault”
– Euro “Might Start To Unravel” If Collapse Of Deutsche Bank
– Do You Really Own Your Gold?
– “Gold Will Likely Soar To A Record Within Five Years”
– Savings Guarantee? U.N. Warns Next Financial Crisis Imminent
– Gold Up 1.5%, Silver Surges 3% – Yellen Stays Ultra Loose At 0.25%

Mark O’Byrne
Executive Director

No central bank investigates any ‘flash crash’ in gold


Maybe because central banks know very well where gold ‘flash crashes’ come from.

* * *

Carney Calls for Inquiry into Sterling ‘Flash Crash’

By Szu Ping Chan and Tim Wallace
The Telegraph, London
Friday, October 7, 2016

The Bank of England has launched an investigation into the “flash crash” in sterling that saw the pound plunge against the dollar and euro.

Mark Carney, the bank’s governor, has asked Guy Debelle, chairman of the markets committee at the Bank for International Settlements, to examine the sudden drop in the value of the pound in thin Asian trading on Friday morning.

The fall in sterling, which saw it drop by as much as 6.1 percent against the dollar and 3.4 percent against the euro, could be discussed at the next meeting of the Financial Policy Committee, which is in charge of maintaining UK financial stability, on Nov 23. …

… For the remainder of the report:






Last week’s dry by shooting of gold was caused by a huge paper avalanche orchestrated by central banks and the BIS.  Their gold reserves are never audited because they have been compromised by leasing and hypothecation:

(courtesy Egon Von Greyerz/Kingworldnews)


Western gold reserves are never audited because they are compromised, von Greyerz says


10:13p ET Sunday, October 9, 2016

Dear Friend of GATA and Gold:

Last week’s smashing of gold was the desperate undertaking of Western central banks and the Bank for International Settlements working in the paper market, Swiss gold fund manager Egon von Greyerz tells King World News today. He adds that the price-suppressing central banks have to use the paper market because they have compromised their gold reserves through leasing. That leasing, von Greyerz says, is why Western gold reserves are never honestly audited. Von Greyerz’s analysis is posted at KWN here:


CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.




UBS’s Axel Eeber warns of the danger of massive central bank intervention

he is correct.

(courtesy Axel Weber/UBS)

UBS’ Weber warns on danger of ‘massive interventions’ by central banks


There are no markets anymore, just interventions. …

The problem with central banking has been mainly the old problem of power — it corrupts.

Central bankers are supposed to be more capable of restraint than ordinary politicians, and maybe some are, but they are not always or even often capable of the necessary restraint. One market intervention encourages another and another and increases the political pressure to keep intervening to benefit special interests rather than the general interest — to benefit especially the financial interests, the banking and investment banking industries. These interventions, subsidies to special interests, increasingly are needed to prevent the previous imbalances from imploding.

And so we have come to an era of daily market interventions by central banks — so much so that the main purpose of central banking now is to prevent ordinary markets from happening at all.

— High School Graduate, GATA’s Washington conference, April 18, 2008.


* * *

UBS’ Weber Warns on Danger of ‘Massive Interventions’ by Central Banks

By Matt Clinch and Geoff Cutmore
CNBC, New York
Monday, October 10, 2016

Axel Weber, UBS chairman and a former policymaker at the European Central Bank (ECB), has warned today’s incumbents that monetary intervention is causing international spillovers and major disturbances in global markets.

Central banks “have taken on massive interventions in the market. You could almost say that central banks are now the central counterparties in many markets. They are the ultimate buyer,” Weber told CNBC on the sidelines of the annual meetings of the International Monetary Fund and the World Bank in Washington.

Weber, who was president of the German Bundesbank between 2004 and 2011 and was also a member of the ECB’s Governing Council, referenced the housing bubble leading up to the 2008 financial crash and said central banks had strayed from their core mandate. …

“I don’t think a single trader can tell you what the appropriate price of an asset he buys is, if you take out all this central bank intervention,” Weber warned, adding that it often meant investors were making bad choices with where to put their money.

… For the complete report:


* * *



India’s gold demand gets rolling again:

(courtesy Dave Kranzler/Ird)


India’s Gold Demand Gets Rolling – An “Unofficial” Bottom?

Our sales have increased by 30-40 per cent over the last week following a decline in gold prices. Given that the current price level will continue, we see this season as one of the best festive seasons in terms of jewellery sales in recent years,” said Rajesh Mehta, managing director, Rajesh Exports, one of the largest jewellery retailers in India. – LINK, as sourced from John Brimelow’s “Gold Jottings”

I say “unofficial” bottom to this 9-week manipulated take-down in the price of gold because we don’t know to what extent the western Central Banks will throw paper at the NY and London gold “markets.”  But based on the latest Commitment of Traders report, the bullion banks are covering their shorts fairly aggressively while the moronic hedge funds dump their longs and try to chase the market lower by piling in to the short side. This has always been a recipe for at least short term move higher in the metals.

But the cartel’s takedown of the paper gold price has created a nice ex-import duty premium bid in the Indian gold market just ahead of India’s festival season:  “Dropping of the rates depend on the international market. If it continues, we are sure to have a bumper Diwali this year,” said N Anantha Padmanabhan, regional chairman, All India Gems and Jewellery Federation – LINK.

Please note that a sudden surge in legal kilo bar imports will not depress dore bar importation or smuggling, the latter of which is now estimated to fill about 30% of India’s annual gold demand now.

Recall that China was closed last week, while India was transitioning into it’s biggest buying season.  The banks used this opportunity to launch their most aggressive paper attack on gold since 2011 in London and on the Comex.   They also used the big drop last week to print profits at the expense of hedge funds and whiny retail bucket shop traders. But, the western gold cartel take-down of gold using paper has helped ignite India demand:  “In the past fortnight, gold has fallen in the international market by 5.8 per cent; the price in India is down 4.9 per cent. With the ‘pitrupaksha’ period over, when buying of gold is considered inauspicious, festive demand has started LINK.

With the bullion banks covering their illegal paper shorts, gold is the most oversold that it’s been in 3 years.  I suggested several weeks ago that we might get a “200 dma” pullback. Here it is:


Again, I’m calling an unofficial bottom because, in a system that allows a criminal to run for President, there’s not telling the degree to which Wall Street will resort to illegal market manipulation in order to keep a lid on the price of gold. But  I am certain that the Indians, Chinese and Russians will – as Alan Greenspan would say – “measurably” increase their “consumption” of physical gold.

I will be reviewing and updating my favorite junior exploration picks in this week’s Mining Stock Journal.  I am featuring some graphs which reinforce my view that this sell-off is over, with the market “percolating” for another big move higher – possibly ahead of the next Fed policy move, which I believe will entail more QE.  I am also going to present some ideas to take advantage of the oversold condition of the highest quality large cap mining stocks.   You can subscribe to the Mining Stock Journal with this link:  MSJ Subscription. This includes email delivery of all back-issues.  The last issue featured a silver explorer trading below 50 cents that could ultimately be a $10 stock.


Your early TUESDAY morning currency, Asian stock market results,  important USA/Asian currency crosses, gold/silver pricing overnight along with the price of oil Major stories overnight




2 Nikkei closed UP 164.67 OR 0.98%   /USA: YEN RISES TO 103.78

3. Europe stocks opened ALL IN THE GREEN (     /USA dollar index UP to 97.44/Euro DOWN to 1.1081

3b Japan 10 year bond yield: RISES TO     -.045%/     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 103.78/ THIS IS TROUBLESOME AS BANK OF JAPAN IS RUNNING OUT OF BONDS TO BUY.

3c Nikkei now JUST BELOW 17,000

3d USA/Yen rate now well below the important 120 barrier this morning

3e WTI::  50.84  and Brent:52.70

3f Gold UP /Yen DOWN

3g Japan is to buy the equivalent of 108 billion uSA dollars worth of bond per month or $1.3 trillion. Japan’s GDP equals 5 trillion usa./“HELICOPTER MONEY” OFF THE TABLE FOR NOW /REVERSE OPERATION TWIST ON THE BONDS: PURCHASE OF LONG BONDS  AND SELLING THE SHORT END

Japan to buy 100% of all new Japanese debt and by 2018 they will have 25% of all Japanese debt. Fifty percent of Japanese budget financed with debt.

3h Oil DOWN for WTI and DOWN for Brent this morning

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund RISES QUITE A BIT to +045%   

3j Greek 10 year bond yield FALLS to  : 8.26%   

3k Gold at $1256.30/silver $17.59(8:45 am est)   SILVER FINAL RESISTANCE AT $18.50 WILL BE DEFENDED 

3l USA vs Russian rouble; (Russian rouble DOWN 52/100 in  roubles/dollar) 62.43-

3m oil into the 50 dollar handle for WTI and 52 handle for Brent/

3n Higher foreign deposits out of China sees huge risk of outflows and a currency depreciation  (already upon us). This can spell financial disaster for the rest of the world/China forced to do QE!! as it lowers its yuan value to the dollar/GOT a  DEVALUATION DOWNWARD from POBC.


30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning .9858 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0931 well above the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.


3r the 10 Year German bund now NEGATIVE territory with the 10 year RISES to  +.049%

/German 9+ year rate BASICALLY  negative%!!!


The bank withdrawals were causing massive hardship to the Greek bank. the Greek referendum voted overwhelming “NO”.  Next step for Greece will be the recapitalization of the banks and that will be difficult.

4. USA 10 year treasury bond at 1.7691% early this morning. Thirty year rate  at 2.501% /POLICY ERROR)

5. Details Ransquawk, Bloomberg, Deutsche bank/Jim Reid.

(courtesy Jim Reid/Bloomberg/Deutsche bank/zero hedge)


Global Stocks Decline On Samsung Woes; Rising Dollar Pressures Oil

Global markets and US equity futures fell on Samsung Galaxy Note 7 contagion concern, while the dollar rose to its strongest level in 11 weeks and U.S. bonds declined as investors boosted wagers that the Federal Reserve will raise interest rates this year.

The dollar continued its recent rise against all of its 16 major counterparts after Chicago Fed President Evans said policy “may well be changing soon,” even as he argued for keeping interest rates low until core inflation moves higher. Treasury two-year note yields jumped to the highest in more than four months. The rand tumbled the most since June after Finance Minister Pravin Gordhan was summoned to appear in court. Samsung Electronics Co. led Asian stocks lower after the company told retail partners to stop sales and exchanges of its Galaxy Note 7 smartphone. U.S. crude oil retreated from its highest price in 15 months.

The uSD has been supported by increasing speculation that the U.S. economy will be sufficiently strong to withstand higher borrowing costs even after last week’s jobs report came in below economists’ predictions, and even as the NY Fed expects Q4 GDP to rise a paltry 1.2%. Markets await more clues on Fed thinking on Wednesday with the release of the minutes of the Federal Open Market Committee’s Sept. 20-21 meeting. A government report Thursday will show retail sales rebounded in September, according to a Bloomberg survey of economists. Investors will also get a chance to assess the health of U.S. companies, with Alcoa Inc. unofficially kicking off the U.S. reporting season on Tuesday.

“Futures are increasingly pricing in a December hike and that itself is driving the dollar higher,” even after data on Friday showed that U.S. non-farm payrolls climbed less than economists forecast, said Mitul Kotecha, head of Asia currency and rates strategy at Barclays Plc in Singapore. “The general backdrop of a firmer dollar is weighing on Asian currencies.”

Sue Trinh, head of Asia foreign-exchange strategy for RBC in Hong Kong confirmed that dollar gains are “entirely linked to the fact that the market has been upwardly rerating expectations of a December rate hike,” said . “Three weeks ago, the implied probability of a December hike discounted by fed funds futures was under 50 percent, today it is close to 70 percent.”

Asian stocks were shaken by the troubles at Samsung, which after announcing it would cut sales of its flammable Note 7 smartphone, subsequently confirmed this morning it would cease production altogether. The MSCI Asia Pacific index slides 0.6% as 7 out of 10 sectors fall; infotechm financials underperform while energy, telcos outperformed.

The Stoxx Europe 600 Index slipped less than 0.1 percent in London. Gains in luxury-goods companies tempered declines; LVMH Moet Hennessy Louis Vuitton SE rose 4.9 percent after reporting sales that topped analysts’ estimates. Christian Dior SE and Burberry Group Plc advanced at least 1.8 percent. Banks and health-care shares led declines among Stoxx 600 groups. Deutsche Bank AG dropped 0.8 percent, for the worst performance on Germany’s benchmark DAX Index. 13 of 19 Stoxx 600 sectors fall with technology, banks underperforming and personal & household, utilities outperforming; 54% of Stoxx 600 members decline, 44% gain

S&P 500 Index futures declined 0.2%, after the S&P500 closed up 0.5% on Monday as surging oil boosted energy producers.

Much attention continues to be focused on Oil, which yesetrday kicked off in the red, but WTI rallied back from late morning to close +3.09% higher at $51.35/bbl. It’s fractionally lower this morning and you have to go back to July 2015 to find the last time WTI closed higher. Prices were initially under upward pressure after the Saudi Arabia’s energy minister said that he was optimistic that a deal between major producers would be reached by November 30th. However that was then overshadowed by comments from Russia President Vladimir Putin. He said that ‘in the current situation we think that (an oil output) freeze or even an oil production cut is likely to be the only right decision to maintain the stability of the global energy sector’ and that ‘Russia is ready to join the joint measures to cap production and is calling for other oil exporters to join’. Those comments also sent Brent up +2.33% and above $53/bbl (at $53.14/bbl) for the first time in a little over a year. It also means that Brent is now up an extraordinary +90% from the lows of mid-January.

However, with the USD continuing to rise, many traders ask themselves how long before the old USD-Crude correlation reasserts itself. As the following chart from Deutsche Bank shows, crude is now 30% overpreiced relative to the Trade-Weighted Dollar.

Yields on 2Y Treasuries increased three basis points to 0.86%, the highest since June. 2. Ten-year note yields rose six basis points to 1.77%. Trading resumed after the Columbus Day bond-market holiday on Monday. The decline in Treasuries is also being driven by the willingness of Saudi Arabia and Russia to cooperate on an oil output deal, said John Gorman, head of non-yen rates trading for Asia and the Pacific at Nomura Holdings Inc. in Tokyo. Higher oil prices tend to boost inflation, which erodes the value of the fixed payments on bonds. European government bonds were little changed, with the yield on benchmark German 10-year bunds at 0.05 percent. The yield on similar-dated U.K. gilts fell three basis points to 0.99 percent. Asian government debt dropped, with yields on 10-year Australian bonds up six basis points to 2.25 percent. Yields on similar maturity notes in Japan climbed by 1.5 basis points and those in South Korea jumped seven basis points.

With the Alcoa Q3 reports after the close, investors will turn their attention to earnings for indications of the health of corporate America. Analysts forecast a 1.6 percent contraction in three-month profit for S&P 500 members, which would be a sixth straight quarterly drop.

Market Snapshot

  • S&P 500 futures down 0.3% to 2152
  • Stoxx 600 down 0.1% to 341
  • FTSE 100 up less than 0.1% to 7099
  • DAX down 0.1% to 10613
  • German 10Yr yield down less than 1bp to 0.05%
  • Italian 10Yr yield down less than 1bp to 1.39%
  • Spanish 10Yr yield down less than 1bp to 1.02%
  • S&P GSCI Index down 0.5% to 376.6
  • MSCI Asia Pacific down 0.6% to 140
  • Nikkei 225 up 1% to 17025
  • Hang Seng down 1.3% to 23550
  • Shanghai Composite up 0.6% to 3065
  • S&P/ASX 200 up less than 0.1% to 5480
  • US 10-yr yield up 5bps to 1.77%
  • Dollar Index up 0.29% to 97.21
  • WTI Crude futures down 0.8% to $50.95
  • Brent Futures down 0.8% to $52.69
  • Gold spot down 0.2% to $1,258
  • Silver spot down less than 0.1% to $17.64

Global Headline News

  • Republicans split over Trump after Ryan backs away, even as he stops short of rescinding endorsement of Trump; campaign reeling after release of vulgar audiotape
  • Sex and the C-Suite: Donald Trump says he wants to run America like a business. But if America were a public company, he probably would be ousted as CEO after his recent vulgar remarks about women caught on tape.
  • As Trump falters, a few hedge funds win big on Mexican peso bets; currency posted worst loss among peers last month as Trump gained, is world’s best in October as Clinton advances
  • Pimco sees two to three hikes by end of 2017 as treasuries fall; Treasuries are world’s worst-performing government securities; U.S. bonds falls as Russia, Saudi Arabia willing to cooperate to limit global oil production
  • Amazon said to limit warehouse access to new merchants; restricting the service signals concerns about capacity issues.
  • Goldman warns China’s outflows may be worse than they look; yuan cross-border payments surged to $27.7 billion in August; Goldman says market factors can’t explain such large moves.
  • Samsung market value plummets $17 billion on Note 7 sales halt; Samsung asks consumers to stop using the ones they’ve already purchased
  • Crude oil near 15-month high buoys energy stocks; dollar climbs
  • Dollar climbs on Fed odds; Europe shares fall after Asian slide

* * *

Looking at regional markets, we start in Asia where stocks traded mostly higher as they took the impetus from the positive lead from Wall Street where gains in oil prices and an increase in Clinton’s lead in the polls supported sentiment, while markets in Japan also played catch-up to yesterday’s gains. ASX 200 (+0.1%) was led by commodity names after WTI crude rose above USD 51.00/bbl and Brent crude printed a 1-year high on reports Russia backed a production freeze deal. Nikkei 225 (+1.0%) outperformed on a weaker JPY as the index also made up for lost ground after yesterday’s holiday closure. Shanghai Comp. (+0.6%) and Hang Seng (-1.5%) initially conformed to the positive tone although gains were capped following a weak liquidity injection by the PBoC and weakness in the property sector after reports China was to tighten control of funds into the sector, while KOSPI (-1.3%) was the laggard amid losses in index heavyweight Samsung after the Co. told its partners to halt sales and exchanges of the Note 7. 10yr JGBs were lower amid gains in riskier assets, while demand was also dampened after the BoJ refrained from entering the market under its bond-buying program and with participants side-lined ahead of tomorrow’s 30-year auction. Chinese Premier Li says global economic recovery is slow and that protectionism is increasing. Premier Li also stated China’s economy showed positive changes in Q3 but added that the economy still faces downward pressure.

Top Asian News

  • Singapore, Swiss Regulators Slam Falcon Bank Over 1MDB Breaches: Falcon linked to $3.8b of 1MDB fund flows, Swiss Finma says.
  • Samsung Market Value Plummets $17 Billion on Note 7 Sales Halt: U.S. agency says to turn off original and replacement devices.
  • BYD Gets $8.9 Billion in Bank Financing for Monorail Development: China Development Bank said to extend loan in BYD partnership.
  • China’s Li Says Debt Risk Controllable, Growth Goal in Reach: Premier confident that no systemic financial risk will occur.
  • Goldman Warns China’s Outflows May Be Worse Than They Look: Yuan cross-border payments surged to $27.7b in August.

European equity markets have failed to kick on from the positive close on Wall Street and Asia and have opened in tentative fashion. The FTSE has seen slight out performance against its major counterparts (+0.25%) and trades close to all-time highs, assisted by continued poor performance in GBP, after posting its second highest close in 32 years. Despite the marginal downside seen in Europe; luxury names shine, as brands follow LVMH after posting a strong beat on earnings estimates. Energy names also trade higher even though oil markets do reside in mildly negative territory (albeit in close proximity to yesterday’s highs with price action somewhat choppy amid thin conditions), with focus remaining on the WEC with Russian Energy minister Novak set to meet with Saudi Energy Minister AL-Falih later today. Fixed income markets have seen mild movement in early morning trade despite Europe seeing a flurry of corporate issuance. The UK remains in the spotlight as many investors have had Gilts under the microscope with UK paper pausing for breath after recent continued declines. EZ periphery yields are trading down between 1-3bps with Greece still benefitting from yesterday’s loan disbursement

Top European News

  • EU Banks May Face Capital Hit in Basel Revamp, Dijsselbloem Says
  • U.K. Court to Decide How Soon Brexit Can Actually Mean Brexit
  • LVMH Gains as Bag Maker Shows There’s Still Growth in Luxury
  • Carney Takes BOE on Tour Out of London to Pursue Bigger Fan Base
  • World-Beating FTSE 100 Is Seen Struggling to Hold Record Levels

In FX, the Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, rose 0.3% in early trading, set for its highest closing level since July 26. The index has gained in six of the past seven trading days as wagers on higher rates become more entrenched. The greenback advanced for a second day versus the euro, appreciating 0.2 percent to $1.1113, and was 0.4 percent firmer at 103.95 yen. The rand dropped more than 3 percent and was at 14.2176 per dollar, as Gordhan confirmed police had delivered a summons to his home. Eye Witness News reported earlier that the minister would be charged with fraud relating to his time as head of the nation’s tax authority. The pound fell for a fourth day, with the its precipitous slide prompting strategists from ING Groep NV, JPMorgan & Chase Co. and Julius Baer Group Ltd. to revise down their longer-term predictions. Sterling has been hurt as investors await clarity from Prime Minister Theresa May’s government on how the nation will manage its exit from the European Union. The pound dropped 0.5 percent to $1.2298. Sweden’s krona slumped as a report showed the nation’s annual inflation rate unexpectedly dropped in September, pushing the currency down 0.6 percent to 9.7005 per euro, the weakest level since December 2014. It fell 0.8 percent to 8.7259 per dollar.
China’s yuan fell 0.04 percent offshore, taking its eight-day loss to 0.7 percent. The currency joined the International Monetary Fund’s reserves basket on Oct. 1. Onshore, the yuan fell to a six-year low.

In commodities, West Texas Intermediate crude slipped 0.5% to $51.09 a barrel after jumping 3.1% last session to its highest closing price since July 2015. Brent fell 0.9 percent to $52.67 per barrel. Oil has gained almost 15 percent since the Organization of Petroleum Exporting Countries provisionally agreed last month to cut production for the first time in eight years. The group’s members meet this week in Istanbul for talks on implementing the deal and Saudi Arabian Energy Minister Khalid Al-Falih said it’s not unthinkable prices will rise to $60 a barrel by the end of this year. Zinc led industrial metals lower, falling 1.8 percent to $2,287 per metric ton. Tin slid 0.5 percent.

Looking at the day ahead, there is some tier 2 data to get through in the form of the NFIB small business optimism reading for September, along with last month’s labour market conditions index print. Away from the data EU finance ministers are due to hold a meeting in Luxembourg today, while the BoE’s Saunders and Kashyap are scheduled to speak this morning along with the Fed’s Kashkari and ECB’s Mersch this afternoon. The other focus for markets today will be the unofficial commencement of Q3 earnings season in the US when Alcoa reports prior to the opening bell.

* * *

US Event Calendar

  • 6am: NFIB Small Business Optimism, Sept., est 95 (prior 94.4)
  • 8:55am: Redbook weekly sales
  • 10am: Labor Market Conditions Index Change, Sept. est. 1.5 (prior -0.7)
  • 11am: Fed’s Kashkari speaks in Arden Hill, Minn.

Bulletin Headline Summary from RanSquawk and Bloomberg

  • European equities trade in a relatively tentative fashion with participants awaiting any further updates from the OPEC/non-OPEC discussions in Istanbul
  • Another quiet morning in FX, but the clear theme is to buy USD’s, with the EUR getting pressed into size bids from 1.1100.
  • Looking ahead, highlights include Fed’s Kashkari and Alcoa kick off earnings season
  • Fed’s Evans said the U.S. central bank’s refrain from rate increases “may well be changing soon” and “a December move could be fine”
  • Rand plunges after Finance Minister Gordhan was summoned to appear in court, raising concern about fiscal policy
  • S. Africa’s Gordhan says police came to house to issue summons
  • German ZEW Oct. investor expectations at 6.2 vs est. 4.0
  • Saudi Arabia and Russia, the world’s two largest crude oil producers, said they’re ready to cooperate to limit output


By snoozing off late in the US session I didn’t miss much given the Columbus Day holiday, but there were still a few interesting developments over the course of the day to highlight. The fallout from the Presidential Election debate late on Sunday night made for some early talking points and generally dominated the wires, while some big moves in Oil as well as European government bonds also caught the attention.

Starting with Oil, having initially kicked off in the red, WTI rallied back from late morning to close +3.09% higher at $51.35/bbl. It’s hovering around that level this morning and you have to go back to July 2015 to find the last time WTI closed higher. Prices were initially under upward pressure after the Saudi Arabia’s energy minister said that he was optimistic that a deal between major producers would be reached by November 30th. However that was then overshadowed by comments from Russia President Vladimir Putin. He said that ‘in the current situation we think that (an oil output) freeze or even an oil production cut is likely to be the only right decision to maintain the stability of the global energy sector’ and that ‘Russia is ready to join the joint measures to cap production and is calling for other oil exporters to join’.
Those comments also sent Brent up +2.33% and above $53/bbl (at $53.14/bbl) for the first time in a little over a year. It also means that Brent is now up an extraordinary +90% from the lows of mid-January. Unsurprisingly then it was the energy sector which led the majority of equity markets higher yesterday. Despite thin volumes the S&P 500 closed up +0.46% (with the energy sector up +1.51%) while in Europe the Stoxx 600 finished +0.69%.

As we’ve highlighted previously we still need to see if OPEC follow through on their word though and there are still the all important country level quota details to hammer out which could have the potential to be a sticking point. That said the renewed optimism is proving to be an opportunistic time for bond issuers. Yesterday Saudi Arabia announced that they would start bond investor meetings in a bid to raise as much as $15bn across multiple maturities according to Bloomberg.

The window for issuers into the US election also remains open although the four week countdown starts today. As the dust settled yesterday following the second debate the overall feeling was that Clinton again came out the victor (somewhat validated by the +1.93% rally for Mexican Peso) but that it was still too early to completely write off Trump’s chances. The big news since however and in a damaging blow to the Republican candidate’s chances was the announcement from House Speaker Paul Ryan (the top elected Republican in Washington) that he would no longer campaign or defend Trump. A spokeswoman for Ryan said the House Speaker would instead ‘spend the next month focused entirely on protecting our congressional majorities’. It’ll be interesting to see what the latest polls now say following this news.

In bond markets the move higher for Gilt yields once again dominated. Yesterday 10y Gilt yields finished just over 5bps higher at 1.020%. Gilts still aren’t back to pre-Brexit levels yet but it is the first time yields have gone back above 1% on an intraday basis since July 21st. Yields have also moved higher for five consecutive sessions now and in that time the 10y yield is 29bps higher. Weakness in Sterling has more than played its part. Yesterday the Pound dropped -0.58% to $1.236 after that -4.15% tumble last week. It’s down another -0.34% in the early going this morning. There was no real new news yesterday and rather it just continues to reflect the aftershock of Friday’s flash crash and the Conservative party conference last week. The feed through to inflation expectations has been unsurprisingly huge with the 5y5y inflation forward now up to 3.570% (and the highest since 2014) from a low of 2.907% in July. Despite the collapse in Sterling and the spectacular rise in breakevens, our FX colleagues think that the chances of a material shift in policy is limited. They note that firstly a tighter monetary policy stance based on expectations of easier fiscal policy and structurally higher inflation due to tariffs and shrinking labor force growth would be politically pre-emptive. Secondly, it would be counterproductive as a tightening in monetary conditions would amplify any shock caused by the triggering of Article 50 in March. Thirdly, valuations are not at extremes in their view and that on a FEER, or sustainable current account basis, Sterling is still close to 10% overvalued.

The moves in Gilts, amplified by the Oil price move, also saw 10y Bund yields (+3.7bps) edge further into positive territory at 0.053%. The exception to the bond sell off yesterday however was Portugal. 10y yields rallied 14bps and the most since June after Portugal’s finance minister said that the rating agency DBRS had a positive assessment of the country’s fiscal efforts. DBRS is due to conclude its review on October 21st and as a reminder S&P, Moody’s and Fitch all rate the company sub-investment grade. DBRS is the lone agency to still rate Portugal IG.

Switching over to the latest in Asia this morning where despite the broadly positive tone on Wall Street, bourses in Asia are a bit more mixed. The Nikkei (+1.16%) is leading gains, helped by a slight weakening for the Yen and also a near 3% rally for the energy sector, while the Shanghai Comp (+0.35)% and ASX (+0.10%) are also slightly higher. On the other hand the Hang Seng (-0.48%) and Kospi (-1.17%) are struggling this morning with the latter being dragged down by a big plummet for the tech sector after Samsung (-6.25%) was reported as requesting retailers to stop sales of its Galaxy 7 smartphones following those concerns of overheating handsets. Elsewhere yields are higher across the board in bond markets. Having reopened this morning, 10y Treasuries are nearly 5bps higher in yield at 1.766%.

Staying with the higher yield environment, yesterday our European equity strategists published a note highlighting that the sell-off in rates has led to some intriguing overshoots in the equity market: with investors rushing out of the defensive bond proxies, these are now priced for a further 40bps rise in German bond yields (twice the move we have seen so far). Our strategists believe the move in rates is due to the rise in the oil price, some better US survey data and investors’ belief in a policy shift from monetary to fiscal stimulus. Yet, with the oil price now 30% above the fair-value level suggested by the US dollar, most data still consistent with a further slowing in US growth, and both Draghi and Kuroda reaffirming their commitment to monetary stimulus over the weekend, our strategists see little further upside to bond yields. Hence, they believe the sell-off in the bond proxies has gone too far.

Yesterday also saw the latest ECB CSPP numbers where they now hold €31.962bn of corporates implying €2.24bn purchases last week at an average daily run rate of €448mn vs. €376mn since the program started in early June. Last week’s volume puts it into the top 5 with many of the largest weeks coming since early September. The ECB is certainly using the increase in primary to increase its holdings.

Before we look at today’s calendar, a quick recap of the small amount of data that was released yesterday. In Germany we learned that exports jumped an impressive +5.4% mom in August (vs. +2.2% expected) while imports (+3.0% mom vs. +0.7% expected) were also higher than expected. For exports that was the largest monthly increase since March 2010 and the data helped to widen the trade surplus to €20bn from €19.5bn. In France the Bank of France business sentiment reading in September was unchanged at 98, while the latest Euro area Sentix investor confidence reading jumped 2.9pts to 8.5 (vs. 6.0 expected).

Looking at the day ahead, this morning we’re kicking off in Germany where the October ZEW survey will be released. The market is expecting a slight pickup in both the headline current situation index (to 55.5 from 55.1) and also the expectations index (to 4.0 from 0.5). This afternoon in the US there is some tier 2 data to get through in the form of the NFIB small business optimism reading for September, along with last month’s labour market conditions index print. Away from the data EU finance ministers are due to hold a meeting in Luxembourg today, while the BoE’s Saunders and Kashyap are scheduled to speak this morning along with the Fed’s Kashkari and ECB’s Mersch this afternoon. The other focus for markets today will be the unofficial commencement of Q3 earnings season in the US when Alcoa reports prior to the opening bell.


i)Late  MONDAY night/TUESDAY morning: Shanghai closed UP 17.10 POINTS OR .56%/ /Hang Sang closed DOWN 302.30 POINTS OR 1.27%. The Nikkei closed UP  164.67 POINTS OR 0.98% Australia’s all ordinaires  CLOSED UP 0.08% /Chinese yuan (ONSHORE) closed DOWN at 6.67197/Oil FELL to 50L84 dollars per barrel for WTI and 52.70 for Brent. Stocks in Europe: ALL IN THE GREEN   Offshore yuan trades  6.67282 yuan to the dollar vs 6.67197 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE WIDENS QUITE A BIT  AS MORE USA DOLLARS   LEAVE CHINA’S SHORES


none today


none today


c) Report on CHINA

China has a huge housing bubble as home prices rise exponentially in tier 1 cities. Over 71% of all new Chinese loans go to fund mortgages on homes. Chinese debt to GDP is over 300%  (approx. 31 trillion USA) and a huge proportion of debt is non performing and debt holders cannot even pay interest on their debt.

(courtesy zero hedge0

Hangzhou, We Have A Problem: “Over 71% Of New Chinese Loans Went To Fund Mortgages”

As Evercore ISI notes in its latest China weekly summary, the “biggest China policy development last week, was multiple cities establishing new rules to slow the spreading housing mania,” adding that this was “surely at Beijing’s behest“, it now indeed appears that China is once again trying to cushion a soft landing for a housing market that even Beijing is worried has gone too far.

While news that China’s housing bubble – especially in Tier 1 cities – is fully back, are not new, documented several weeks ago in shown in our post “Chinese Home Prices Jump Most On Record: “The Numbers Are Hard To Believe”, and shown in the following charts…

… discussed most recently by Bloomberg in an article titled “China’s Housing Boom Looks Like Last Year’s Equities Bubble,” it was news that, as Caixin reported today, the head of China’s central bank said the country will put in place “certain controls over credit growth,” signaling a squeeze on liquidity that has been blamed for the property sizzle in dozens of major cities across the country. Zhou Xiaochuan made the comments at a meeting of the IMF board — the International Monetary and Financial Committee — on Saturday.

As the Chinese publication further adds, “investors armed with cheap credit have flocked to China’s property market in recent months, and home prices in 70 major cities rose 7.5% in August compared with a year earlier, according to China’s National Bureau of Statistics.”

The debt-fueled binge behind the latest housing bubble is also not news to our readers: new loans in August reached 948 billion yuan ($142 billion), more than double the figure a month before, according to the latest PBOC data. However, as Caixin notes, “over 71 percent of the loans went to households, mainly to fund mortgages.” We showed this unprecedented debt-funded house buying spree a month ago courtesy of the following Capital Economic chart, which revealed that a record 20% of all new loans are now being used to fund mortgages.

It now appears that China has been confronted by global powers to address this bubble before it becomes systemic. As Zhou told the IMF in a written statement this weekend, “China will use various policy instruments to keep banking liquidity at an adequate level and allow credit and total social financing to grow at a steady and moderate pace.”

Zhou had warned earlier against the emergence of housing bubbles. Speaking at the G20 meeting of finance ministers and central bank governors in Washington on Thursday, Zhou said the government has already enacted policies to develop “a healthy property market.”

And now that the IMF has officially warned that the country’s growing debt “posed risks to financial stability”, China has shifted from mere words to actions.

In what may be the first indication that China’s tremendous home-price surge is about to hit a brick wall, about 20 Chinese cities tightened home purchasing requirements in late September to cool an overheated market, with some prohibiting property developers from selling homes to residents who don’t have a local hukou, or residency registration, and to those who already own more than one home. Other cities have raised the minimum down payment required.

Zhou also proposed controlling credit growth to corporations by “lowering corporate leverage and dealing with piling debt through market-based approaches, such as debt restructuring, debt-to-equity swaps, securitization, and liquidation.”

To be sure, China is desperate to address its soaring debt problem: its gap of credit to gross domestic product, taking into account loans to the private sector excluding financial institutions, was 30.1 as of March. China’s gap was highest among all 43 economies monitored by the financial watchdog. A debt level above 10 signals a potential crisis, according to the agency.

However, while it is now forced to admit, and address, the debt-fueled housing bubble, China has even bigger debt-related problems.

As Caixin wrote, the economic downturn and overcapacity in certain heavy industries have resulted in a group of “zombie companies” that are struggling to survive and repay debt. We wrote about this last week in “A Quarter Of All Companies Can’t Pay The Interest On Their Debt.” It remains to be seen just how China will resolve its massive debt overhang, which according to the latest IIF estimates accounts for roughly 300% of GDP:

Zhou tried to placate fears by saying that although the bad-loan ratio in the banking system has risen, the overall risks are “controllable” because banks have sufficient reserves to deal with them. Needless to say many hedge fund managers disagree, warning that China’s NPLs continue to rise, and as the latest Chinese reserve data showed, capital continues to flow out of the country. Last week, the PBOC reported that China’s currency reserves fell by $18.79 billion in September to $3.17 trillion, the lwoest since April 2011. The drop was larger than the $11 billion estimated, and followed a drop of $15.89 billion in August. It was was the largest monthly decline since May, suggesting that while some complacency may have returned to the Chinese market, few if any of the deteriorating trends that the market was so concerned about a year ago and in the start of 2016, have been resolved.

* * *

Putting it all in context is the following must see documentary from Al Jazeera’s 101 East titled “The End Of China, Inc.” In it 101 East explains that “there’s a magic formula to becoming a millionaire in China – borrow big to earn big.” For years, individuals, state-owned companies and municipalities have taken massive loans to chase the Chinese dream. Now it’s payback time, but a severe economic slowdown means many are struggling to pay their debts. Entire neighbourhoods have become “ghost towns”, industrial companies sit idle and the unemployed are growing desperate. Government economists claim China has enough in its coffers to cover the bad loans, but defaulting on it could send the world’s economy into a tailspin.

101 East asks, is this the end of China Inc?



A bail in is likely now as DB’s CEO returns home empty handed after failing to reach a deal with the dept of Justice.

(courtesy zero hedge)

Deutsche Bank CEO Returns Home Empty-Handed After Failing To Reach ‘Deal’ With DOJ: Bild

Even in the world of negative interest rates, Deutsche bank fund costs are considerably higher than its peer: -17 basis points vs -28 basis points !! IN this negative interest rate world that can only signify its creditworthiness is basically ZERO!!!!!~

(courtesy zero hedge)


Deutsche Bank Stock Slides As Short-Term Funding Cost Rises

As the powers-that-be play whack-a-mole with various systemic risk indicators, desperately tamping down contagion concerns, amid no progress in strengthening the world’s most systemically dangerous bank; we warned two weeks ago of yet another canary in the coalmine of Deutsche Bank’s demise (that no one was looking at). This week, that canary… died.

The last few weeks have seen Fed swap lines engaged and:

  • Deutsche Bank stock ‘managed’.
  • ECB Lending facilities ‘managed’.
  • EUR-USD basis swaps ‘managed’.

But, despite all of this ‘help’ Deutsche credit risk remains at or near record highs…


And as Deutsche Bank stocks began to squeeze higher, we tweeted…

Odds tomorrow DB quotes Libor just a few bps away from all other banks

And now sure enough, as Bloomberg reports, in the European money market, its funding costs are almost twice as much as those of its peers.

Moreover, one of the bodies responsible for collating money market rates thinks you shouldn’t know what individual banks are paying for their money — an unforgivable attitude, particularly in light of the lies many banks told (and have been fined for) about interest rates that affect about $350 trillion of securities around the world. 


Deutsche Bank says its short-term borrowing cost is -0.17 percent; the next highest rate among the 20 banks that contributed this week’s levels is -0.28 percent from Portuguese state-owned bank Caixa Geral de Depositos, while the consensus derived from the entire panel is -0.31 percent. Here’s a chart showing what various European banks say the borrowing cost known as Euribor is for three-month euros:


Simply put, as Bloomberg’s Mark Gilbert explains, technically, in this wacky world of negative euro interest rates, it’s hard to talk about “borrowing costs” as such. More precisely, the discount at which Deutsche Bank says it can raise funds has declined. But you get the picture: Even with rates below zero, everyone else can get funds cheaper than the Frankfurt-based firm can.

It’s hard to interpret Deutsche Bank saying money is more expensive for it than for its peers as anything other than a reflection of its perceived creditworthiness in the banking community, as opposed to the official assessment by the rating agencies.

What’s worse is that the administration said in March that it plans to draw a veil over what individual banks’ funding costs are:

LIBOR panel banks have expressed concern not only that commercially sensitive data would become public but also that day-on-day volatility in LIBOR rates could lead to false inferences about a bank’s financial stability and credit quality. To address this concern and to maintain transparency as far as possible, IBA will publish individual submissions after three months’ delay, as at present, but on a non-attributed basis.

So another canary may soon disappear… because what you can’t see, you can’t trade on. “You can’t handle the truth.”






Great reason for gold to fall!

the pound crashes today:

(courtesy zero hedge)




Cable has retraced back down over 60% of its flash crash collapse…


“The sentiment on sterling is closely tied to expectations of hard Brexit,” said Georgette Boele, a currency and commodity strategist at ABN Amro in Amsterdam.

BOE officials’ “comments are not helpful at all. Saunders said that he was concerned about volatility in sterling as it pushed up inflation. Despite this, we think that the BOE is more focused on growth than on inflation at this point in time.”



Turkey and Russian finally sign the very strategic Turkish steam gas pipeline which will run under the Black Sea.  This is a death blow to the Qatar-Saudi Arabia- pipeline proposal.  The uSA are not happy campers with this.

Also Egypt needs 12 billion dollars in aid and are approaching Moscow.  Will Egypt switch alliance and go over to Russian influence as Russia will propose air bases on Egyptian soil:

(courtesy zero hedge)

Turkey And Russia Sign Strategic “Turkish Stream” Gas Pipeline Deal

Less than three months after Turkey’s president Erdogan, in the aftermath of the mid-July “failed coup” visited Putin in Russia in his first and very symbolic foreign trip, Putin has returned the favor with a visit of his own to Turkey, where he promptly confirmed that economic relations between the two nations are on solid footing with the November 2015 downing of a Russian fighter jet over Turkey now largely forgotten, and where Turkey and Russia earlier today signed the strategic Turkish Stream gas pipeline agreement.

As noted previously, once completed the pipeline will carry Russian natural gas to Turkey under the Black Sea, and on to Greece and Europe. The project, with an estimated total cost of $13 billion, was announced in December 2014 during Putin’s visit to Turkey as an alternative to the canceled South Stream pipeline through Bulgaria, which the Bulgarian government killed due to European pressure.

The signing of the deal came after a bilateral meeting between Turkish President Recep Tayyip Erdogan and his Russian counterpart Vladimir Putin who was in Istanbul to attend the 23rd World Energy Congress. During the signing ceremony, Erdogan said ministers and experts will continue to hold bilateral talks after the deal.

As Hyrriyet reports, Erdogan also said they reached consensus on the acceleration of the process for the Akkuyu nuclear plant. In addition, Putin also added that the two countries also reached consensus on discount in natural gas prices. He stated that Moscow lifted restrictions on citrus exports.

Russia’s Gazprom and Turkey’s BOTAS in 2014 signed a memorandum of understanding (MoU) for the construction of the Turkish Stream gas pipeline, with a capacity of 63 billion cubic meters (bcm) of gas per year from Russia to Turkey across the Black Sea.  However, talks on the project were halted last year after Turkey shot down a Russian air force jet and Moscow retaliated with trade sanctions but since then the two countires have made significant progress to mend relations. Erdogan said in August at a joint news conference with his Russian counterpart that building the gas pipeline quickly was a priority.

On Sept. 7, Gazprom said it had received first regulatory approvals from Turkey, allowing the project to move into implementation phase.

The meeting of the two leaders marked the third time after bilateral relations were put back on track in August since the jet crisis.

Putin said the need to develop the Turkish Stream natural gas project had been stressed in his talks with Erdogan, adding that Russia also actively planned to expand its hydrocarbon exports eastward to China, Japan and India.  “Russia will further interact in energy with all interested parties for mutual beneficial partnerships on an equal footing,” he added.

Just as important in light of the ongoing deterioration in Russian relations with the west, Erdogan also said the two leaders discussed Syria and the Euphrates Shield Operation as well as strategies and cooperation regarding humanitarian aid to Aleppo. Putin said Moscow was on the same page with Ankara about delivering humanitarian aid to Aleppo.

Also today, Russian paper Izvestia resported that Cairo and Moscow were in talks on a deal which would allow Russia to deploy a military facility in Egypt.

“The negotiations over possible participation of Russia in rebuilding of Egyptian military sites on the Mediterranean coast near Sidi Barrani are quite successful. If both parties agree to the terms, as soon as 2019 the base may become operational. Cairo is ready to lease it to Moscow because it would use it to pursue high-priority geopolitical goals, which align with Egypt’s interests,” a diplomatic source told the newspaper.

A military source told the newspaper that the new asset would be convenient, considering the growing instability in the region. “The utility of an airbase near Sidi Barrani is obvious for Moscow. Even though Russia has a similar base in Syrian Khmeimim, the presence of Russian warplanes in Egypt would allow Moscow conduct military missions in the western Mediterranean,” Talaat Musallam, a strategic and security expert and former Egyptian armed forces general told the newspaper.

However, shortly after the Russian report emerged, Egypt’s Al-Ahram daily denied the report which claimed that Moscow and Cairo are negotiating a deal on a Russian airbase in western Egypt. Commenting on the report, military expert Nabil Fuad told RIA Novosti that Egypt’s military doctrine does not allow it to host foreign-controlled military bases. “That is a principal issue for Egypt not to allow foreign military bases on its territory,” he said, adding that during the Cold War Soviet military specialists would work at Egyptian military facilities, rather than have their own.

Then again, in light of Egypt’s ongoing negotiation with the IMF to obtain a $12 billion loan, it would stand to reason that Egypt would vocally reject any speculation, however informal, that it is seeking to turn its back on the west and become another Russian satellite nation.

Egypt, a long-time ally of the United States, somewhat distanced itself from Washington after a period of instability, which started with mass protests against strongman Hosni Mubarak in 2011. Cairo’s relations with Russia saw resurgence, particularly in defense sphere. Russia was the first non-Arab country that President Sisi visited after his election in 2014.





Brilliant!! Putin cancels trip to France after Hollande accuses the Russians of war crimes:

(courtesy zero hedge)


Putin Cancels Trip To France After Hollande Accuses Russia Of War Crimes


In the latest confirmation of deteriorating relations between Moscow and the West, Russian President Vladimir Putin canceled a visit to Paris next week after President Francois Hollande said he would see him only for talks on Syria.

Over the weekend, tensions emerged between Moscow and Paris after the Russian UN delegation vetoed a French-drafted United Nations Security Council resolution on Syria. French officials’ growing anger over a Russian-backed Syrian offensive against rebel-held areas of the city of Aleppo had led them to reconsider whether to host Putin on Oct. 19, Reuters reports.

“I made it known to Mr Putin that if he came to Paris, I would not accompany him to any ceremonies, but that I was ready to continue the dialogue on Syria. He decided to postpone the visit,” a questuionably hospitable Francois Hollande said earlier at the Council of Europe in Strasbourg.

The Russian president had been scheduled to inaugurate a new Russian Orthodox cathedral and visit a Russian art exhibition in the French capital on Oct. 19, however that now will not happen as after the US and Russia broke off diplomatic relations regarding Syria, it now appears that France, or at least Hollande, has also joined.

The Kremlin confirmed Putin’s decision, but made no mention of Syria and said he was ready to come to Paris at Hollande’s convenience.

While Paris has said it is vital to keep dialogue going with Moscow and not sever relations, events in Syria have damaged their ties as the two countries support opposite sides in the conflict. Describing Russian air strikes in Syria as “war crimes”, Hollande said it was still necessary to talk with Moscow, but only if discussions were “firm, frank,” otherwise it would be a “charade.”

Ironically, the latest accusation of Russian ‘war crimes”, comes a day after Reuters reported that US support of Saudi Arabia’s mass killings of innocent civilians in Yemen, means the Obama administration may also be guilty of war crimes.

“With Russia, France has a major disagreement on Syria and the Russian veto of the French resolution at the U.N. Security Council has prevented the cessation of bombings and enablement of a truce,” Hollande said at the Council of Europe.

“I’m ready to meet President Putin if we can advance peace, end the bombings and announce a truce,” he said.

Since that will not happen, it now appears that France and Russia have all but halted diplomatic relations, at least at the highest level.






I do not know about you, but I think the following is quite alarming;  The Russian government has told Russian students studying abroad to immediately return to Russia:

That news should cause gold to fall a little more. Not alarming enough

(courtesy zero hedge)


Russian Government Officials Told To Immediately Bring Back Children Studying Abroad

In Europe, when it gets serious, you have to lie… at least if you are an unelected bureaucrat like Jean-Claude Juncker. In Russia, however, when it gets serious, attention immediately turns to the children.

Which is why we read a report in Russian website Znak published Tuesday, according to which Russian state officials and government workers were told to bring back their children studying abroad immediately, even if means cutting their education short and not waiting until the end of the school year, and re-enroll them in Russian schools, with some concern. The article adds that if the parents of these same officials also live abroad “for some reason”, and have not lost their Russian citizenship, should also be returned to the motherland. Znak cited five administration officials as the source of the report.

The “recommendation” applies to all: from the administration staff, to regional administratiors, to lawmakers of all levels. Employees of public corporations are also subject to the ordinance. One of the sources said that anyone who fails to act, will find such non-compliance to be a “complicating factor in the furtherance of their public sector career.” He added that he was aware of several such cases in recent months.

It appears that the underlying reason behind the command is that the Russian government is concerned about the optics of having children of the Russian political elite being educated abroad, while their parents appear on television talking about patriotism and being “surrounded by enemies.”

While we doubt the impacted children will be happy by this development, some of the more patriotic locals, if unimpacted, are delighted. Such as Vitaly Ivanov, a political scientist who believes that the measure to return children of officials from studying abroad, is “long overdue.” According Ivanoc, the education of children of the Russian elite abroad is subject to constant ridicule and derision against the ruling regime. “People note the hypocrisy of having a centralized state and cultivating patriotism and anti-Western sentiment, while children of government workers study abroad. You can not serve two gods, one must choose.”

On the other hand, political analyst Stanislav Belkovsky quoted by Znak, believes that such decisions should be approached with more pragmatism. Such a recommendation is more likely to lead to an outflow of officials from the state, rather than allow the return of the children studying at elite foreign universities. He also warned of attempts to recreate an echo chamber such as that experienced after the failed July coup attempt on Turkey’s President Erdogan.

But what he said next was more disturbing: “On the one hand, this is all part of a package of measuresto prepare the elites for some ‘big war’ even if it is rather conditional, on the other hand – this is another blow to the unity of President Putin with his own elite” Belkovsky said. He adds that the Western sanctions launcedh in March 2014, had sought to drive a wedge between Putin and elites. In response, the Kremlin began to act precisely according to the logic of these sanctions. “But while a ban for having assets in the West is one thing, and understanable, when it comes to a ban for offshore health and education services, the blowback will be far greater, as it represents a far more important element of the establishment’s life strategy.”

Ultimately the motivation behind Putin’s decision is unclear: whether it is to show Russia’s high-ranking oligarchs who is boss, to boost a sense of patriotism among the nation by sending a symbolic message that the west is no longer a welcome destination for Russia’s rich kids, or just a preemptive move of repatriating of any individuals affiliated with Russian politics, is unclear, however it underscores the severity of the ongoing diplomatic crisis and just how dramatic the upcoming isolation between Russia and the West is likely to become in the coming months – unless of course tensions don’t dramatically deescalate – resulting in even greater collapse in global commerce and a further slowdown to world economic growth, which may ultimately lead to an armed conflict, whether regional or global, as the only possible outcome.


The following is important:  Bridgewater’s Ray Dalio calculates that a rise in yield of just one per cent would cause a loss of 2.4 trillion dollars to global bond investors
(courtesy Ray Dalio/Brigewater/zero hedge)

Ray Dalio Warns A 1% Rise In Yields Would Lead To Trillions In Losses

Last week, we shared with readers a fascinating presentation that Bridgewater’s Ray Dalio made to NY Fed staffers at the 40th Annual Central Banking Seminar held on Wednesday, October 5, 2016. In it, Dalio pointed out that thoughts which dared to question the economic orthodoxy, and which were once relegated to the fringe blogs, have become the norm, pointing out that it is no longer controversial to say that:

  • …this isn’t a normal business cycle and we are likely in an environment of abnormally slow growth
  • …the current tools of monetary policy will be a lot less effective going forward
  • …the risks are asymmetric to the downside
  • …investment returns will be very low going forward, and
  • …the impatience with economic stagnation, especially among middle and lower income earners, is leading to dangerous populism and nationalism.

He further notes that the debt bubble which was not eliminated during the financial crisis of 2008, has since grown to staggering proportions, and notes that “the biggest issue is that there is only so much one can squeeze out of a debt cycle and most countries are approaching those limits.”

Alas, while the underlying symptoms are clear, that does not make the solution of the problem any easier. Quite the contrary. As Dalio further adds, “when we do our projections we see an intensifying financing squeeze emerging from a combination of slow income growth, low investment returns and an acceleration in liabilities coming due both because of the relatively high levels of debt and because of large pension and health care liabilities. The pension and health care liabilities that are coming due are much larger than the debt liabilities in most countries because of demographics – i.e., due to the baby-boom generation moving from working and paying taxes to getting their retirement and health care benefits.”

Here the Bridgewater head provides a simple explanation for why the system is unsustainable: debt is fundamentally a liability even though it is treated as an asset by those who “own” it. As a result, “holders of debt believe that they are holding an asset that they can sell for money to use to buy things, so they believe that they will have that spending power without having to work. Similarly, retirees expect that they will get the retirement and health care benefits that they were promised without working. So, all of these people expect to get a huge amount of spending power without producing anything. At the same time, workers expect to get spending power that is equal in value to what they are giving. They all can’t be satisfied.”

How does the Fed react to this inconsistency?  By a familiar tool: financial repression.

As a result of this confluence of conditions, we are now seeing most central bankers pushing interest rates down to make them extremely unattractive for savers and we are seeing them monetizing debt and buying riskier assets to make debt and other liabilities less burdensome and to stimulate their economies. Rarely do we investors get a market that we know is over-valued and that approaches such clearly defined limits as the bond market now. That is because there is a limit as to how negative bond yields can go. Their expected returns relative to their risks are especially bad.

What does that mean in practical terms? Well, in short: lots of pain for holders of duration: “If interest rates rise just a little bit more than is discounted in the curve it will have a big negative effect on bonds and all asset prices, as they are all very sensitive to the discoun  rate used to calculate the present value of their future cash flows. That is because with interest rates having declined, the effective durations of all assets have lengthened, so they are more price-sensitive.”

And the punchline”

… it would only take a 100 basis point rise in Treasury bond yields to trigger the worst price decline in bonds since the 1981 bond market crash. And since those interest rates are embedded in the pricing of all investment assets, that would send them all much lower.

Consider that Ray Dalio’s most stark crash warning to date.

Of course, it is not new to regular readers becuase this is precisely what we warned about back in June, when we showed the massive duration exposure on the market, and explaining Why The Fed Is Trapped: A 1% Increase In Rates Would Result In Up To $2.4 Trillion Of Losses

As we showed using Goldman calculations, in 1994, the average yield on the bond index was 5.6%, vs. 2.2% currently. Lower bond coupons means that proportionately more of the bond cashflows now comes from principal, which tends to be distributed towards the end of the bond lifetime.

Here is the math of how much in just bond losses a 1% increase in rates would lead to:

The total face value of all US bonds, including Treasuries, Federal agency debt, mortgages, corporates, municipals and ABS, is $40 trillion (Securities Industry and Financial Markets Association). The Barclays US aggregate is a smaller number, $17 trillion, as the index excludes some categories of debt, such as money markets, with low duration. Using either measure, total debt outstanding has grown by over 60% in real Dollars since 2000.

For conservative purposes, we use the lower debt estimate, and get that when combining a duration estimate of 5.6 years with a total notional exposure of $17trn, and current Dollar price of bonds of $105.6, indicates that, to first order, a 100bp shock to interest rates – the same one that Dalio envisions – would translate into a $1trn market value loss. That is using the more conservative estimate of the bond market. Using the broader, and more accurate, bond market sizing of $40trn, the market value loss estimate would be $2.4 trillion.  While the largest number would be stunning, even the smaller $1 trillion loss estimate is massive:

it would amount to over 50% larger than the market value lost in the 1994 bond market selloff in inflation-adjusted terms, and larger than the cumulative credit losses experienced to date in the non-agency residential mortgage backed securities market.

This is what Goldman concludes in early June when delivering its own stark forecast of massive losses should rates spike:

“even if there is not a large net social loss from a rise in rates, the $1 trillion gross loss estimate suggests that some investor entities would likely experience significant distress. In the 1994 bond market decline, for example, losses on a mortgage derivative portfolio were a major factor contributing to the Orange County, California bankruptcy event. All in, the increase in total gross debt exposure, combined with lengthening bond durations and an arguably expensive bond market, suggest that rising yields should be on the short list of scenarios to be monitored by risk managers.”

Now we know that it certainly is on the very short list of scenarios monitored by the world’s biggest hedge fund.

So what, if any, recommendations does Dalio have now that virtually all the “smartest men in the room” admit the Fed is not only trapped, but that a spike in yields would lead to the worst crash in 35 years:

Right now, a number of the riskier assets look attractive in relationship to bonds and cash, but not cheap in relationship to their risks. If this continues, holding non-financial storeholds of wealth like gold could become more attractive than holding long duration fiat currency flows with negative yields (which is what bonds are), especially if currency volatility picks up.

Needless to say, we are eagerly waiting for precisely that inflection point.




There does not seem to a a production cut:

(courtesy zero hedge)

A Strange “Production Cut” – OPEC Oil Output Hits Record High As Rosneft Says “No” To Production Cap

Something odd happened on the way to the recently “agreed upon” OPEC production cut: instead of cutting production, OPEC countries have seen their oil output surge, and according to an IEA reported released today, the oil producing countries pumped oil at record-high volume last month, while officials from three member countries, those exempt from the “deal”, said they plan to raise output even more in the near future.

OPEC increased output by 160,000 barrels a day to a record 33.64 million barrels a day in September, the IEA said, a rather stark departure from last month’s Algiers agreement where most OPEC members agreed to bring output down to a maximum of 33 million barrels a day.

The increased production shows, among other things, not only just how farcical the recent oil surge has been on the back of expectations that somehow OPEC will actually not only agree on lower production quotas and more importantly comply with then, but also how much work OPEC must do to achieve production cuts it agreed to last month in an attempt to end a crude glut that has depressed prices for two years.

“Now the real work starts,” the IEA, which advises industrialized nations on energy policy, wrote in its monthly report. The market—if left to its own devices—may remain in oversupply through the first half of next year, it said.

The work will be even more difficult as a result of the deal exemption granted to Libya, Iran and Nigeria, who are now scrambling to capture as much market share as possible before the OPEC deal is effected, if ever. As the WSJ reports, last month, production from Iran, Libya and Nigeria increased by a collective 120,000 barrels a day over August levels, the IEA said. In the near term, officials from those countries say they aim to boost daily production by another 580,000 barrels or so—an amount about equal to the total volume OPEC said it would cut.

Further increases from those countries “would suggest that bigger cuts would have to be made by others, such as Saudi Arabia,” the IEA said. Saudi Arabia, OPEC’s largest producer, saw output fall by about 20,000 barrels a day to 10.58 million barrels a day from August to September, the IEA said.

As many warned previously, the potential supply that could come from the trio of countries could jeopardize any deal, and it took just one month to get confirmation.

Rising production in Libya, Nigeria and Iraq is due to a convergence of disparate factors. In Libya, years of fighting that blocked oil ports ended recently when a militia took control of key export facilities and agreed to restart shipments. The government also plans to link long-dormant oil fields to a new export pipeline. Libyan officials say the country’s production could rise from 300,000 barrels a day in August—the baseline that OPEC used in calculating its proposed production cap—to 700,000 barrels a day.

After years of depressed oil production under the weight of Western sanctions, Iran is slowly ramping up its exports now that those penalties are lifted.

Nigeria, where oil thieves and rebel groups have sabotaged oil facilities, is adding up to 200,000 barrels a day after it repaired a key pipeline that had been damaged and was out of commission for months.

Furthermore, as we pointed out just after the Algiers deal was signed, a just as substantial challenge for OPEC is dealing with Iraq, which has protested the data OPEC is using to calculate production. Iraq says the independent analysis firms OPEC relies on understate Iran’s recent production and could result in the country being forced to adopt an unfairly low cap. The IEA said Iraq increased output by 90,000 barrels a day last month over the previous month.

Making matters worse for the “deal”, OPEC is also pinning hopes for reducing the crude glut on producers outside the group, mostly Russia. Speaking on Monday at an energy summit in Istanbul, Vladimir Putin said Moscow could join the cartel’s production cuts. But last month, his country boosted production of crude and natural-gas-liquids by about 400,000 barrels a day to a post-Soviet high, the IEA said.

However earlier today Igor Sechin, Russia’s most influential oil executive and head of energy giant Rosneft said his company will not cap oil production as part of a possible agreement with OPEC.

His comments underline how difficult it is for Russia to get its oil companies to freeze or cut output as part of a potential deal with the Organization of the Petroleum Exporting Countries designed to support oil prices.

“Why should we do it?” Sechin, known for his anti-OPEC position, told Reuters in Istanbul on Monday evening, when asked if Rosneft, which accounts for 40 percent of Russia’s crude oil output, might cap its production.

Head of Russian state oil firm Rosneft Igor Sechin

Earlier on Monday, Sechin told reporters that Rosneft planned this year to raise its oil production, already the world’s largest among listed producers, above the 203 million tonnes (4.1 million barrels per day) it produced in 2015.

Sechin said he doubted some OPEC countries, such as Iran, Saudi Arabia and Venezuela, would cut their output either: “Try to answer this question yourself: would Iran, Saudi Arabia or Venezuela cut their production?”

The answer, of course, is no. But it will take the algos some time to figure it out.

* * *

Finally, in a note released overnight, Goldman Sachs analyst Damien Courvalin said that “the post-Algiers rally in oil prices has continued, fueled by comments by Russia and Saudi Arabia today (October 10) that point to a greater probability of reaching a deal to cut production.” He notes that Saudi Arabia likely holds the reigns to such an agreement, with signs of elevated funding stress potentially driving Saudi to commit on November 30.

In light of the latest news, we would suggest that the probability of an agreement is slim to nil.

And indeed, as Courvalin notes, “the risks of a disagreement are not negligible with Iraq currently the most vocal opponent, aiming to grow production next year and disputing usual measures of its production as too low. Failure to reach such a deal would push prices sharply lower to $43/bbl in our view as we forecast that the global oil market is in surplus in 4Q16.

Goldman’s conclusion: “Net, we find that an agreement to cut production, while increasingly likely, remains premature given the high supply uncertainty in 2017 and would prove self-defeating if it were to target sustainably higher oil prices.”



Your early morning currency/gold and silver pricing/Asian and European bourse movements/ and interest rate settings TUESDAY morning 7:00 am


Euro/USA   1.1081 DOWN .0061/REACTING TO NO DECISION IN JAPAN AND USA + huge Deutsche bank problems 


GBP/USA 1.2273 DOWN .0071 (Brexit by March 201/pound clobbered)

USA/CAN 1.3217 up .0048

Early THIS TUESDAY morning in Europe, the Euro FELL by 61 basis points, trading now well above the important 1.08 level FALLING to 1.1229; Europe is still reacting to Gr Britain BREXIT,deflation, announcements of massive stimulation (QE), a proxy middle east war, and the ramifications of a default at the Austrian Hypo bank, an imminent default of Greece, Glencore, Nysmark and the Ukraine, along with rising peripheral bond yield further stimulation as the EU is moving more into NIRP,  THE USA’S NON tightening by FAILING TO RAISE THEIR INTEREST RATE AND NOW THE HUGE PROBLEMS FACING TOO BIG TO FAIL DEUTSCHE BANK / Last night the Shanghai composite CLOSED UP 17.10 OR   0.56%   / Hang Sang  CLOSED DOWN 302.30  POINTS OR 1.27%     /AUSTRALIA IS HIGHER BY 0.08% / EUROPEAN BOURSES ALL IN THE GREEN

We are seeing that the 3 major global carry trades are being unwound. The BIGGY is the first one;

1. the total dollar global short is 9 trillion USA and as such we are now witnessing a sea of red blood on the streets as derivatives blow up with the massive rise in the rise in the dollar against all paper currencies and especially with the fall of the yuan carry trade. The emerging market which house close to 50% of the 9 trillion dollar short is feeling the massive pain as their debt is quite unmanageable.

2, the Nikkei average vs gold carry trade ( NIKKEI blowing up and the yen carry trade HAS BLOWN up/and now NIRP)

3. Short Swiss franc/long assets blew up ( Eastern European housing/Nikkei etc.

These massive carry trades are terribly offside as they are being unwound. It is causing global deflation ( we are at debt saturation already) as the world reacts to lack of demand and a scarcity of debt collateral. Bourses around the globe are reacting in kind to these events as well as the potential for a GREXIT>

The NIKKEI: this TUESDAY morning CLOSED UP 164.17 POINTS OR 0.98%

Trading from Europe and Asia:
1. Europe stocks ALL IN THE GREEN

2/ CHINESE BOURSES / : Hang Sang CLOSED DOWN 302.30  OR 1.27%  ,Shanghai CLOSED  UP 17.10 POINTS OR .56%   / Australia BOURSE IN THE GREEN: /Nikkei (Japan)CLOSED IN THE GREEN   INDIA’S SENSEX IN THE GREEN

Gold very early morning trading: $1255.80


Early TUESDAY morning USA 10 year bond yield: 1.769% !!! UP 5in basis points from FRIDAY night in basis points and it is trading WELL BELOW resistance at 2.27-2.32%.

 The 30 yr bond yield  2.501, UP 5 IN BASIS POINTS  from FRIDAY night.

USA dollar index early TUESDAY morning: 97.44 UP 55 CENTS from FRIDAY’s close.

This ends early morning numbers TUESDAY MORNING




And now your closing TUESDAY NUMBERS

Portuguese 10 year bond yield: 3.37% DOWN 7 in basis point yield from FRIDAY  (does not buy the rally)

JAPANESE BOND YIELD: -.045% UP 1.4 in   basis point yield from FRIDAY

SPANISH 10 YR BOND YIELD:1.016%  DOWN 1 IN basis point yield from  FRIDAY (this is totally nuts!!/

ITALIAN 10 YR BOND YIELD: 1.376 DOWN 2  in basis point yield from FRIDAY 

the Italian 10 yr bond yield is trading 36 points HIGHER than Spain.





Closing currency crosses for TUESDAY night/USA DOLLAR INDEX/USA 10 YR BOND YIELD/2:30 PM

Euro/USA 1.1065 DOWN .0076 (Euro DOWN 76 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/

USA/Japan: 103.43 DOWN: 0.275(Yen UP 28 basis points/POLICY ERROR ON BANK OF JAPAN

Great Britain/USA 1.2141 UP 0.0004( POUND DOWN 202basis points AND A COMPLETE COLLAPSE.

USA/Canada 1.3234 UP 0.0066 (Canadian dollar DOWN 66 basis points AS OIL FELL SHARPLY (WTI AT $50.70). 


This afternoon, the Euro was DOWN by 76 basis points to trade at 1.1065


The POUND FELL 202 basis points, trading at 1.2141/ A COMPLETE COLLAPSE

The Canadian dollar FELL by 66 basis points to 1.3234, WITH WTI OIL AT:  $50.70

The USA/Yuan closed at 6.6718

the 10 yr Japanese bond yield closed at -.045%  UP 1.4  IN BASIS POINTS / yield/ AND THIS IS BECOMING BOTHERSOME TO THE BANK OF JAPAN

Your closing 10 yr USA bond yield:DOWN 5  IN basis points from FRIDAY at 1.757% //trading well below the resistance level of 2.27-2.32%) very problematic

USA 30 yr bond yield: 2.493 UP 5 in basis points on the day /*very problematic as all bonds globally rose in yield (lowered in price)


Your closing USA dollar index, 97.56 UP 67 CENTS  ON THE DAY/4 PM 

Your closing bourses for Europe and the Dow along with the USA dollar index closing and interest rates for TUESDAY: 2:30 PM EST

London:  CLOSED DOWN 26.62 POINTS OR 0.38%
German Dax :CLOSED DOWN 46.92 OR  0.44%
Paris Cac  CLOSED DOWN 25.52 OR 0.57%
Spain IBEX CLOSED DOWN 8.30 OR 0.10%
Italian MIB: CLOSED DOWN 158.39 POINTS OR 0.95%

The Dow was DOWN 200.38 points or 1.09%  4 PM EST

NASDAQ  DOWN 81.88 points or 1.54%  4 PM EST
WTI Oil price;  50.70 at 1:30 pm; 

Brent Oil: 52.35   1:30 EST




This ends the stock indices, oil price, currency crosses and interest rate closes for today

Closing Price for Oil, 5 pm/and 10 year USA interest rate:


BRENT: $52.45

USA 10 YR BOND YIELD: 1.766%

USA DOLLAR INDEX: 97.65 UP 76 cents

The British pound at 5 pm: Great Britain Pound/USA: 1.2139 DOWN 0.0205 or 205 basis pts.

German 10 yr bond yield at 5 pm: +025%


And now your more important USA stories which will influence the price of gold/silver



Quant Qrash Slams Stocks, Batters Bonds



“probably nothing”


A stunned universe of mainstream media dipbuyers were perplexed today as stocks AND bonds tanked. The reason is simple – what goes up (record levels of correlation between stocks and bonds driven by the idiocy of central banks)…


Must come down (levered long risk-parity funds forced to liquidate/delever as their models explode).


So stocks are sold, bonds are sold, and volatility is forced higher…

As RBC’s Charlie McElligott warned last week… this equity drawdown is probably a quick blast of systematic deleveraging:

US rate vol again picking-up (with 10s entering a new ‘higher’ range 1.75 / 1.85) / bear steepening evident with some monster blocks this morning–>as such, we see the same uptick in cross-asset vol we’ve been experienced over the past 2 months.  Nothing disorderly in equities today (bc the rates move isn’t disorderly either), but mechanical supply it seems is evident from the systematic community…again.


Dollar strength (which drives VIX btw), Crude strength and nascent signs of inflation pick-up all conspiring against USTs currently… in addition to THE buyer of USTs moving their “buy zone” to a higher range it seems (or at least letting things “shake out” to find a new level).


As I said last Thursday in the “RBC Big Picture,” when USTs “…sell off in a “leveraged short convexity” world (back on envelop $3.7T of AUM w leverage between risk-parity, risk-control and structured products with vol targeting “dials”), and where cross-asset correlations are forever tied to the same inputs (CB volatility suppression and the level of the US Dollar), you see “wonky” and “lunging” unwinds.”  In simpler terms, leveraged allocation strategies which are primarily long ‘low historical volatility assets like USTs (alongside their longs in stocks, commods, EM) have to deleverage on rates breakouts higher.  At times, this can spill-over beyond rates….see all four “taper tantrums.”

Quants were also hurt as the lowest momo stocks have plunged in recent days…


Trannies remain green on the week but everything was down today…


VIX surged to 16.5, stocks dropped to the low end of the recent range…


S&P 500  Tumbled below its 100DMA – biggest drop since September 9th’s drop driven by Eric Rosengren’s hawkishness…


VIX surged back above its 200DMA


But crucially, stocks broke out of their wedge, with no bounce…


Oil “stability” did nothing to save stocks…


Banks and Energy were not worst today but the narrative of their leadership is starting to fade (Helathcare driven by pharma was worst)


Treasury yields were up across the board (with the long-end underperforming) as cash bonds returned from holiday…


The USD Index surged again on the back of Yen and Cable weakness…


Cable leading the way lower against the USD…


USD strength (and a lack of effective jawboning from OPEC) sent commodities lower…


Charts: Bloomberg




The following confirms and proves that Hillary new that Saudi Arabia and Qatar fund ISIS:

(courtesy zero hedge)

Hillary Confirms Saudi Arabia, Qatar Fund ISIS In Leaked Email


It sure looks like Eliz. Warren will go ballistic as it seems that the fake account creation goes back to 2005 and not 20111 as Wells Fargo head Stumpf testified to Congress.

(courtesy zero hedge)


This is a biggy!!  Janet’s all import LMCI labor index is crashing.  How on earth can she raise rates when her favourite labour index is falling out of bed

(courtesy zero hedge)


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